Mortgage applications dropped 12 percent last week compared to the week prior as mortgage rates soared to their highest level in two years, the Mortgage Bankers Association reports. 

In the week ending June  28, the percentage of refinancing applications -- which make up the biggest bulk of the MBA's index -- fell 16 percent. Meanwhile, the percentage of applications for home purchases -- viewed as a leading indicator of future home sales -- dropped 3 percent last week compared to the prior week. 

Mortgage rates were to blame for the decreases, MBA notes. Fewer home owners have incentives to refinance at current rates, says Mike Fratantoni, the MBA’s vice president of research and economics. 

The MBA reports that the average rate on 30-year fixed-rate mortgages rose to 4.58 percent last week -- its highest rate since October 2011. The average on 15-year fixed-rate mortgages also rose, climbing to 3.64 percent -- its highest level since July 2011, the MBA reports. 

Source: The Wall Street Journal